Correlation Between Varta AG and Vastned Retail

Can any of the company-specific risk be diversified away by investing in both Varta AG and Vastned Retail at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Varta AG and Vastned Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Varta AG and Vastned Retail NV, you can compare the effects of market volatilities on Varta AG and Vastned Retail and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Varta AG with a short position of Vastned Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Varta AG and Vastned Retail.

Diversification Opportunities for Varta AG and Vastned Retail

0.27

Correlation Coefficient

Varta AG  Vastned Retail

Modest diversification

The 3 months correlation between Varta and Vastned is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Varta AG and Vastned Retail NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vastned Retail NV and Varta AG is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Varta AG are associated (or correlated) with Vastned Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vastned Retail NV has no effect on the direction of Varta AG i.e., Varta AG and Vastned Retail go up and down completely randomly.

Pair Corralation between Varta AG and Vastned Retail

Assuming the 90 days trading horizon Varta AG is expected to under-perform the Vastned Retail. In addition to that, Varta AG is 5.31 times more volatile than Vastned Retail NV. It trades about -0.22 of its total potential returns per unit of risk. Vastned Retail NV is currently generating about -0.09 per unit of volatility. If you would invest  2,261  in Vastned Retail NV on October 22, 2024 and sell it today you would lose (101.00) from holding Vastned Retail NV or give up 4.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.0%
Values	Daily Returns

Varta AG  vs.  Vastned Retail NV

Varta AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Varta AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Vastned Retail NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vastned Retail NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vastned Retail is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Varta AG and Vastned Retail

The main advantage of trading using opposite Varta AG and Vastned Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varta AG position performs unexpectedly, Vastned Retail can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Vastned Retail will offset losses from the drop in Vastned Retail's long position.

The idea behind Varta AG and Vastned Retail NV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.